For liability reasons it "wouldn't be prudent" for us to give you direct advice on this topic but here are some excellent sources of information for you to review with either your CPA or Tax Lawyer.
IRS FAQ re: The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
IRS News Update: Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form
IRS Publication 4681 re: Canceled, Debts, Foreclosures and Abandonments
IRS Form 982